Rupesh Parikh • Oppenheimer & Co. Inc.

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Walmart US CEO & President John Furner expressed confidence, noting U.S. inventory was up only 2.2% with strong sell-through in back-to-school. Sam's Club President & CEO Chris Nicholas added that for Sam's Club, inventory growth is necessary to support its accelerating, unit-driven sales growth, and that inventory turns remain healthy.

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Walmart U.S. CEO John Furner reported very strong results, with prescription growth over 10% excluding GLP-1s, indicating market share gains. He credited the new pharmacy delivery initiative for being helpful to customers and driving new digital user acquisition. A Sam's Club executive also noted their pharmacy business saw double-digit growth excluding GLP-1s.

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CFO John David Rainey confirmed they feel 'really close' to both an earnings and a free cash flow inflection point. He stated that the capital allocation strategy reflects their conviction, pointing to the 13% dividend increase and plans to buy back more stock than the previous year, all while continuing to invest in the business through CapEx.

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EVP and CFO Akhil Shrivastava explained that for fiscal 2026, the majority of operating margin expansion will come from SG&A, primarily through reductions in non-consumer facing costs. He noted that gross margin is expected to be flat to positive despite tariff headwinds, with more significant gross margin opportunities expected in the longer term. President and CEO Stéphane de La Faverie added that a large portion of cost savings from the PRGP are being reinvested into consumer-facing initiatives to fuel top-line growth.

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EVP and CFO Tracey Travis confirmed that CapEx has already been reduced from initial plans and remains an area of focus, along with working capital improvements. She described inventory levels as being in 'pretty good shape' following significant progress last year, but noted a continued focus on agile planning to manage inventory and control obsolescence amid sales declines.

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EVP & CFO Jim Lee stated that maintaining the guidance range is a prudent and cautious approach given ongoing consumer and tariff uncertainty. Incoming CEO Michael Fiddelke addressed the labor question by describing a strategy to change how labor is used, not just add more. He cited a successful test where certain stores specialize as fulfillment hubs, improving efficiency and the in-store experience, a model now expanding to more markets.

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CEO Brian Cornell emphasized a focus on 'good retail fundamentals,' including in-stock reliability and a great in-store experience. CCO Rick Gomez added that Q2 plans include 10,000 new items and major launches like Nintendo Switch 2 to drive traffic. Regarding pricing, Gomez stated they are 'comfortable' with current price gaps and view value holistically, highlighting new Target Circle 360 benefits as a key value driver beyond just price.

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CEO Brian Cornell, CCO Rick Gomez, and COO Michael Fiddelke all weighed in. Cornell stressed a focus on 'good retail fundamentals' like in-stocks and a great store experience. Gomez detailed plans to build on Q1 bright spots with newness (10,000 new summer items), major launches like Nintendo Switch 2, and in-store events. On pricing, Gomez stated they are 'comfortable' with current price gaps but view value holistically, highlighting the new Target Circle 360 benefit of no markups on Shipt marketplace orders.

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CCO Rick Gomez noted that while discretionary categories remain challenged, there are bright spots. He cited double-digit growth in the 'All in Motion' apparel brand and a strong consumer response to newness in Home from partnerships like Hearth & Hand. He believes as weather turns colder, apparel sales will improve. CEO Brian Cornell added that while these categories represent over 50% of the business, the company will plan cautiously for 2025 to stay in step with the consumer and macro trends.

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CFO & COO Christine Sacco explained the retail order volatility is impacting Q2 guidance, attributing the full-year outlook change to a 60/40 split between eye care supply and retail patterns, expecting normalization in the second half. Chairman, President & CEO Ron Lombardi detailed the multi-phase strategy to stabilize Clear Eyes supply, including new suppliers and the Pillar five acquisition, expressing confidence in a significant second-half recovery that will continue into fiscal 2027. He noted that while market share has been impacted, the entire redness relief category has declined, and he expects share to recover over time.

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CFO & COO Christine Sacco explained the guidance is wider and more prudent due to macro volatility, a ~$7 million e-commerce order pull-forward from Q1, and unpredictable foreign exchange swings. Chairman, President & CEO Ron Lombardi added that the Clear Eyes supply recovery plan is unchanged, with expanded capacity and new suppliers coming online in fiscal '26, leading to a more significant recovery in the second half of the year, though quarterly shipments may remain lumpy.

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CEO Ron Lombardi stated that Clear Eyes production is improving incrementally each quarter, with a more significant supply increase expected in the second half of fiscal 2026. CFO and COO Christine Sacco attributed the anticipated Q4 gross margin increase to the timing of various cost-saving initiatives and noted the company feels good about its business momentum heading into the next fiscal year.

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CEO Ron Lombardi addressed both topics. Regarding Clear Eyes, he stated that sales are expected to improve sequentially in Q3 as retail inventory levels hit their low point, and the company is actively working to strengthen the supply chain for the long term. For Summer's Eve, he noted the brand's performance was flat in Q2, marking progress toward growth, and highlighted a recent market share gain for the first time in three years. On the topic of drugstore closures, Lombardi explained that the anticipated level of closures is consistent with recent years and is already factored into their business outlook, emphasizing that Prestige is channel-agnostic due to consistent margins across retailers.

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Senior VP & CFO Mandy Fields declined to provide specific Q2 revenue figures for Rhode but confirmed it is expected to be accretive for the full year. She clarified that Rhode's SG&A expenses are included in Q2 financials without the benefit of its initial Sephora sell-in revenue, which occurred pre-close, thus impacting Q2 margins. For international, she noted that momentum continues but reminded that the first half of last year had more sell-in activity.

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Chairman and CEO Tarang Amin expressed high confidence in Rhode's excellent supply base in Italy and South Korea, stating it has ample capacity for the Sephora launch and future growth. SVP & CFO Mandy Fields declined to quantify the offset from mitigation efforts, deferring details until there is more certainty on tariffs.

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CEO Tarang Amin reported that the company is very pleased with Naturium's launch at Ulta Beauty, which includes a full assortment of facial and body care. He stated that they will continue to explore further expansion opportunities for Naturium both domestically and internationally, highlighting its recent launch into Boots in the U.K. as an example of this strategy.

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COO Nikki Beatty reported that Freshpet is experiencing growth across all income groups and demographics. However, she noted that the company's 'Most Valuable Pet Parents' (MVPs) are disproportionately from higher-income households. Within the portfolio, she highlighted that the premium Homestyle Creations line is performing exceptionally well and exceeding expectations.

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COO Nikki Beatty noted that while Freshpet is growing across all income groups and demographics, its core 'MVP' consumer base tends to skew towards higher-income households. Within the product portfolio, she highlighted that the premium Homestyle Creations line is performing exceptionally well, with new innovations in that line far exceeding initial expectations.

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CEO William Cyr stated that inventory is in good shape across channels, with prior pet specialty distributor issues now largely resolved. He noted they don't expect significant destocking as they ship close to consumption. He confirmed that value-oriented channels like club and mass are winning due to higher foot traffic. CFO Todd Cunfer reinforced that they are shipping very close to consumption, minimizing destocking risk.

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Co-Founder and President Scott Morris reported that the overall pet category is seeing modest growth around 3% when including online channels. He noted that pet adoption rates have stabilized at a more consistent pace, with a slight trend towards smaller and medium-sized dogs, which is a favorable dynamic for Freshpet.

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Executive Scott Morris noted that while traditional brick-and-mortar pet retail growth has softened, the overall category shows growth when including online channels. He observed that pet adoption rates are stabilizing, with a slight trend towards smaller and medium-sized dogs, which is favorable for Freshpet.

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President and CEO Rick Dierker quantified the destocking impact as a 100 basis point drag in Q2, down from 300 basis points in Q1, expecting a slight impact going forward. For Touchland, Dierker highlighted priorities including driving household penetration from a low base (6%), launching new fragrances, expanding the body mist product, and pursuing international growth.

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Executive Richard Dierker confirmed that international performance was in line with expectations. CFO Lee McChesney provided the segment outlook, noting continued international growth with some macro pressure, slightly better SPD performance, and a domestic business performing similarly to Q1 in Q2 before improving in the back half. Dierker added that promotions in laundry and litter were stable, but could intensify if categories remain flat.

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CEO Matthew Farrell stated that while packaging and messaging updates are complete, the key to stabilization in 2025 will be meaningful product innovation, which has not yet hit the market. CFO Rick Dierker added that the core focus is on product reformulations. He noted some positive signs where price gap adjustments drove unit growth, and Farrell highlighted that the L'IL CRITTERS brand has been responsive and gained some share.

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Matthew Farrell (executive) clarified that recent promotional activity in laundry and litter was driven by specific competitors rather than a broad increase. He confirmed a consumer spending slowdown in June and July across categories, attributing it to lapping price increases and general consumer weariness. Richard Dierker (CFO and Head of Business Operations) added that this deceleration was broad-based.

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CFO Curtis Valentine noted that inflation has been consistent quarter-to-quarter, tracking in line with CPI, with some mix benefits from organic and value packs. CEO Jack Sinclair added that the Sprouts customer base appears resilient and focused on healthy eating, showing few signs of behavioral change despite broader economic uncertainty.

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CFO Curtis Valentine confirmed that new stores continue to perform exceptionally well, with recent vintages comping strongly, though there were no new incremental surprises. President and COO Nick Konat, with an endorsement from CEO Jack Sinclair, stated that the loyalty program is performing well in its 35-store test, meeting or exceeding KPIs for sign-ups and scans. He announced plans for a national launch in the second half of the year, starting in Arizona.

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CFO Curtis Valentine attributed the strong comps to broad-based, balanced growth, particularly from new stores and brick-and-mortar traffic, with no material financial impact from recent weather events. President and COO Nick Konat explained that e-commerce growth is driven by product differentiation and is expected to continue outpacing the core business.

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CEO Brian Grass explained that price increases will average 7-10% across the portfolio, with a range of 0-15% on specific items, and that the company is using conservative elasticity assumptions. CFO Tracy Schuerman added that pricing is selective by brand and category. For Q2, Schuerman projected gross margin to be slightly lower than Q1 but improved year-over-year, while the SG&A ratio is expected to be in the 40-41% range before normalizing to around 39% in the second half of the year.

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CFO Brian Grass provided a directional figure, stating the total tariff impact for fiscal 2026 could be over $200 million before mitigation. He confirmed the company 'absolutely' expects to generate positive free cash flow for the full year. Grass also reiterated expectations for a weaker Q1, citing retailers pausing direct import shipments from China to avoid tariffs and headwinds in the company's own China business due to trade tensions.

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CEO Noel Geoffroy reported that OXO's new distribution at Walmart has shown strong velocity and expanded household penetration, leading to further opportunities. For Hydro Flask, she noted it's early for Target, but the Costco program saw strong velocity that prompted replenishment orders. CFO Brian Grass advised that to estimate fiscal 2026 accretion from Olive & June, one should annualize the partial Q4 contribution while accounting for its high growth rate and the fact that Q4 is a seasonally softer period for the brand. He reiterated its attractive margin profile.

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CEO Noel Geoffroy explained that the Q2 beat was largely due to a smaller-than-expected negative impact from the Tennessee distribution center issues, which wasn't significant enough to warrant raising the full-year guidance. On the Beauty category, Geoffroy detailed a multi-pronged approach, including foundational brand-building work, new leadership, retailer collaboration, and targeted innovation like Curlsmith's new products and Revlon's value-focused marketing campaign. She indicated these steps are already showing early results but acknowledged that a full turnaround takes time.

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EVP & CFO David Kennerly stated that the impact from Express Scripts (ESI) was minimal in Q1, contributing less than 10 basis points to sales. He confirmed that due to the unpredictable timing of large contracts, ESI benefits are not included in the full-year guidance. Regarding current trends, Mr. Kennerly noted that the second quarter had started in line with the company's full-year guidance.

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EVP & CFO David Kennerly explained that the impact from Express Scripts (ESI) was minimal in Q1, at less than 10 basis points of sales. He confirmed that due to the unpredictable timing of large commercial contracts, the full-year guidance continues to exclude any potential benefits from ESI. Regarding current trends, Mr. Kennerly stated that the company is pleased with the start to the second quarter and that performance is in line with guidance.

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Interim CFO Todd Foley explained that as a primarily domestic retailer, Kroger has limited exposure. While there is some impact on fresh produce from Mexico and Canada, he described it as a 'mid-single-digit effect' and not massive. He added that sourcing teams are proactively working to diversify suppliers to mitigate any potential impact on prices.

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Interim CFO Todd Foley explained the guidance was narrowed to reduce variability with one quarter remaining, noting that strong Q3 pharmacy results were offset by an expectation for tougher Q4 comparisons due to weather and fuel volatility. Chairman and CEO Rodney McMullen added that weaker-than-expected Q3 fuel results impacted the top end of the range. Regarding Boost, McMullen stated they are very happy with the program's high renewal rates and NPS scores but are more excited about the future potential to educate more customers on its value.

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Interim CFO Todd Foley clarified the higher CapEx is to accelerate store projects, which could lead to a sustained higher spend level. CEO Rodney McMullen added these investments are performing well. Regarding EPS, Foley projected Q3 would be slightly ahead of the prior year, with Q4 slightly behind on a comparable 52-week basis.

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CFO Stewart Glendinning explained that while performance has been strong, the company felt it was prudent to maintain the existing full-year range. He noted the decision to guide to the high end for Q2 was to provide transparency that the strong top-line performance is occurring alongside the quarter's anticipated cost pressures from tariffs and investments.

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CEO Mike Creedon stated that 3.0 stores continue to perform well, with results improving the longer the format is in place as customers discover the new offerings. He noted that all conversion cohorts from 2024 strengthened in Q4. The biggest opportunity for improvement, he said, lies in operational execution, specifically ensuring a store is fully prepared and staffed for the conversion rather than trying to 'muscle' through it.

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CEO Michael Creedon reported that 3.0 stores continue to perform well, with results improving the longer the format is in place as customers discover the expanded assortment. He identified the biggest opportunity for improvement in the operational execution of conversions, emphasizing the need to ensure stores are fully staffed and ready before undergoing the change to maximize returns, a key focus for 2025.

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CEO Todd Vasos expressed high confidence, attributing the top-line strength to successful "back to basics" execution, including improved store standards, lower employee turnover, better in-stocks from SKU rationalization, and a sustained influx of higher-income trade-in customers. CFO Kelly Dilts clarified that the updated guidance reflects Q1's outperformance but also incorporates heightened uncertainty around tariffs and consumer spending for the remainder of the year. She noted Q2 SG&A will be pressured by incentive compensation accruals, likely leading to a year-over-year EPS decline for that quarter.

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CEO Todd Vasos expressed confidence, citing the success of "back to basics" initiatives, including improved store standards, lower employee turnover, better supply chain performance, and SKU rationalization. He also noted the positive impact of trade-in customers. CFO Kelly Dilts explained that the updated guidance reflects Q1's outperformance but also accounts for heightened uncertainty regarding tariffs and consumer spending, noting significant SG&A pressure from incentive compensation is expected in Q2.

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CEO Todd Vasos reported that over 70% of stores meet the company's condition standards, with a goal of reaching 80%, and noted that in-stock levels are at multi-year highs. CFO Kelly Dilts added that strong inventory management drove a 25% increase in cash flow from operations in 2024. She also mentioned plans to pay down $500 million in debt with cash in Q1 2025, further improving the balance sheet.

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CFO Kelly Dilts identified incentive compensation, retail salary pressure, and depreciation as expected headwinds for 2025. She projected that capital expenditures would be similar to the current year as a percentage of sales, with investment focused on high-return projects like store remodels.

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CFO Kelly Dilts explained the guidance assumes a 'macro neutral to a slight softening' of the consumer, with the low end reflecting Q2's comp rate and the high end assuming some acceleration. She suggested a CAGR from 2019 is a more relevant benchmark. CEO Todd Vasos added that promotional activity ramped up in mid-July with an 'almost immediate' positive response from consumers, particularly through digital channels, giving them confidence in their strategy for the second half.

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CFO Gary Millerchip indicated that some Q3 margin drivers, like commodity deflation, were unique to the quarter and reiterated the company's focus on reinvesting gains into member value. Regarding a potential tariff rollback, he described the environment as too dynamic to predict but stated that Costco's agility and strong supplier relationships would allow it to widen its value advantage regardless of the scenario.

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Executive VP & CFO Gary Millerchip indicated that some margin drivers, like deflation in certain ingredients, were unique to the quarter and that the company's focus is on reinvesting gains to drive top-line growth rather than sustaining short-term margin benefits. Regarding tariff rollbacks, he stated the environment is too dynamic to predict, but emphasized that Costco's buying expertise and limited SKU model provide agility to widen its value proposition for members regardless of the tariff landscape.

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Executive Gary Millerchip clarified that the net year-over-year headwind is expected to be mid-single digits because the new increase replaces one from the prior year. He affirmed that the company's goal is to fund its commitment to industry-leading wages by continuously finding operational efficiencies and driving labor productivity, as successfully demonstrated in Q2.

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Executive Gary Millerchip clarified that while the overall gross margin was stable, there were several offsetting factors. A major headwind came from gas margins cycling a volatile period from the prior year. This was offset by benefits from improved e-commerce margins, a favorable business mix, and positive net effects from the co-brand credit card program, where incentives received from the issuing bank outweighed the costs of funding member rewards.

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Gary Millerchip, an executive, responded that quality and value are paramount for members. He noted an encouraging shift to nonfood spending as inflation has dissipated. In food, he sees signs of a shift from dining out to eating at home, with strong growth in fresh categories and lower-cost proteins. Regarding retail media, he described it as a significant long-term opportunity that Costco is on a journey to develop. He emphasized that Costco's approach will be different, reinvesting the vast majority of proceeds to drive top-line growth for CPG partners.

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President & CEO Kecia Steelman responded that she was proud of the team's focused execution, which drove the better-than-planned Q1 results. She highlighted sharpened in-store execution, improved inventory in-stocks, and more effective marketing with higher earned media value. Steelman also noted that new and exclusive brand launches provided a positive halo effect, reinforcing her confidence in the plan's ability to drive long-term growth.

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CEO David Kimbell confirmed that new Ulta stores continue to perform well, and the company remains confident in its expansion plans, including its small-format stores. President & COO Kecia Steelman added that the Target partnership is on track to reach 800 locations and is successfully driving new member acquisition and re-engagement, with nearly 4 million guests having linked their loyalty accounts.

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CEO Jim Snee reaffirmed confidence in the FY26 target, stating nothing has changed. EVP of Retail John Ghingo described the consumer as 'strained' but still willing to pay for value, citing strong growth in premium (Applegate), authentic (Herdez), and versatile (Jennie-O) offerings. Snee added that Hormel is holding its own in retail and structured to outperform in foodservice.

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CFO Jacinth Smiley projected Q2 margins would be comparable to Q1, pressured by turkey and nut costs. CEO James Snee added that while Q2 gross margins will be down year-over-year, they should improve sequentially from Q1. EVP John Ghingo expressed that he was impressed by the company's internal transformation, encouraged by the momentum in the unified Retail business, and excited by the opportunity to apply a stronger consumer focus to Hormel's unique protein-anchored brand portfolio.

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CEO Jim Snee expressed confidence in the guidance, citing expected growth in key retail categories like bacon and Applegate, a strong innovation pipeline, and continued momentum in Foodservice and International segments. He noted a planned double-digit increase in brand support. CFO Jacinth Smiley added that reaching the higher end of the range would depend on factors like higher volume, better product mix, an improved turkey market, and over-delivery from both the Planters brand recovery and the Transform & Modernize (T&M) initiative.

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CEO James Snee stated that volumes for Planters and contract manufacturing were lower than expected, while the decline in Turkey was largely in line with expectations. For fiscal 2025, Snee indicated it was early but highlighted expected tailwinds from a Planters rebound, continued benefits from the 'transform and modernize' initiative, and sustained momentum in key retail and international brands. He noted that the outlook for the turkey market remains too dynamic to predict.

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CEO Mark Adam Barrocas clarified that he does not believe there was a pull-forward of demand. He stated that while the outlook for North America remains upbeat, the company's guidance accounts for potential revenue disruption from out-of-stocks. To manage tariff impacts, some new products intended for the U.S. will now launch first in Europe, a strategic reversal from the prior year.

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CEO Mark Adam Barrocas stated that the company's base case assumption for 2025 is a flat overall market. On tariffs, he explained the P&L impact varies, flowing through almost immediately for some products and taking 4-5 months for others with pre-built inventory, with a rough average of 60-75 days. CFO Patraic Reagan added that proactive investments in supply chain diversification and inventory are designed to 'engineer a soft landing' and that the impact is already factored into their 2025 guidance.

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CEO Sumit Singh noted that hard goods performance is improving due to both industry stabilization and Chewy's own efforts in assortment expansion and site experience. Executive David Reeder confirmed that hard goods have grown year-over-year for two consecutive quarters. Regarding tariffs, Reeder stated that Chewy's exposure is low, as the vast majority of its net sales are from domestically sourced products, with only a small portion of hard goods sourced from China.

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CFO David Reeder stated that monthly sales trends were stable and predictable, consistent with expectations, due to the high percentage of recurring Autoship revenue. He clarified that the hard goods category has stabilized and is now broadly flat quarter-to-quarter, which management views as a positive signal of a normalizing market rather than it outpacing consumables.

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CEO Sumit Singh stated unequivocally that Chewy is gaining share. He provided a calculation suggesting that Chewy is now capturing approximately $0.50 of every dollar that moves online in the pet category, an increase from the $0.40 to $0.42 range the company had mentioned in the past, indicating an acceleration in share capture.

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CEO Sumit Singh stated unequivocally that Chewy is gaining market share. He provided a calculation suggesting that Chewy is now capturing approximately $0.50 of every dollar that moves online in the pet category, an acceleration from the $0.40-$0.42 figure mentioned in the past. This indicates that the company's share gains are increasing.

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EVP, Strategy and Development Bill Werner stated that the company is actively and opportunistically looking at its existing store base for relocation chances, particularly where population or retail landscapes have shifted. He framed it as part of a broader strategy to 'play offense' and reposition the fleet for the future, suggesting it is an integrated part of their overall real estate program rather than a separate, incremental count.

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EVP, Strategy and Development Bill Werner explained that the company views relocations as an opportunistic way to 'play offense' and reposition its fleet for the future as markets and populations evolve. The commentary suggests these are strategic decisions made when opportunities arise, rather than a separate, fixed quota that would be purely incremental to the stated new club opening pipeline.

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CEO Robert Eddy stated that while Q4 margins were slightly below expectations due to price investments, the company will always prioritize member value. He noted that the outlook is clouded by potential tariffs but expressed confidence in the company's ability to mitigate cost increases through sourcing, own brands, and supply chain efficiencies. Over the long term, he remains bullish on driving margin improvement.

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